Getting an equal deal on super
Recent discussions of marriage equality for same sex couples have highlighted the difference that marriage can make, especially for issues like child custody. But when it comes to super, couples don’t need to officially tie the knot.
On 1 July 2008, the Australian government made sweeping changes to the law affecting the rights of couples and families, including in relation to superannuation. As a result, heterosexual and same-sex couples in a de facto relationship now have the same entitlements regarding superannuation as married couples (note that family law amendments relating to de facto relationships do not currently apply in WA).
Defining a de facto relationship
In the Family Law Act, a de facto relationship is defined as two people living together on a genuine domestic basis, having regard to all the circumstances of the relationship – in other words, as a married couple would. Generally, the couple needs to be together for two years or more. For taxation purposes, the relevant definition is ‘spouse’. This includes persons of the same or different sex in relationships registered under State or Territory law, and persons living on a genuine domestic basis as a couple.
Superannuation and de facto relationships before 2009
However, until 1 March 2009, de facto couples had different superannuation rights than people who were officially married. For example, if you were in a de facto relationship that broke down, you couldn’t divide superannuation entitlements as married couples could, potentially leaving the lower earning partner much worse off.
Also, if you were in a same sex de facto relationship and your partner passed away, you could only receive a death benefit from a private sector superannuation fund as your de facto’s beneficiary if you could prove that you were either financially dependent on them or that you were in an interdependent relationship.
If the death benefit were paid to the estate the tax could be higher than if paid to a dependant, potentially leaving the surviving partner (and any children) financially disadvantaged.
A broader definition of ‘spouse’
This all changed from 1 July 2008, when the definition of the word ‘spouse’ was amended. Since that date, ‘spouse’ for both super and tax refers to either:
– A person you are married to,
– Someone you are in a heterosexual or same-sex relationship with, and the relationship is registered under a State or Territory law,
– A person you are living with on a genuine domestic basis in a relationship as a couple – in other words, a de facto.
What does this mean for de facto couples?
This change has some important implications for de facto couples. Now, if you and your partner separate:
– Any property disputes will be heard in the Family Court and the Federal Magistrates’ Court.
– Your superannuation, property and debts will be divided considering what each of you contributed to the relationship, both financially and in terms of caring for the family and household.
– Your future needs will be taken into account – including taking care of children, your capacity to earn and the financial resources you already have (before 1 March 2009, only married couples had this option).
Importantly, if you are in a de facto relationship you can now split your superannuation entitlements too if the relationship breaks down, as married couples can, giving you more ways to divide your property fairly.
De facto couples are also eligible for death benefits in private sector superannuation funds, and receive the same death benefit tax concessions as married couples and their children.
From 1 March 2009, same-sex partners and their children can also be beneficiaries of superannuation payouts and receive equal access to death benefits and pensions within a Commonwealth superannuation scheme.
Find out more
To find out more about your financial rights in a de facto relationship, talk to your financial adviser today.
This document has been prepared by Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) based on its understanding of current regulatory requirements and laws as at 15 November 2012. This document is not advice and provides information only. It does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement available from the product issuer carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision.
Copyright © 2012 Colonial First State Investments Limited.
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